Hello, one, Welcome to The Australian's Money Puzzle podcast. I'm James Kirkby, the World's editor at The Australian. Welcome aboard everybody. And the last time that I had Sarah Petty on the show, she's the property reporter on the Great Response and she gave a particular perspective of jen Z in the property market. And she's back today and we are going to talk about some red hot issues in property for property investors, for anyone in the world of property.
Just now, rentals still rising, insurance going through the roof. We're going to look at a popular but I have to tell you debatable concept that you see reported all the time where they say you can buy cheaper than rent in certain suburbs, and I see that's starting to
happen again now. I see those stories coming through and I just want to ask Sarah about the reality of that and a few other things, including the rather spectacular story she had recently where she spawned an apartment that was for sale in Melbourne Metropolitan Melbourne for ninety nine thousand dollars. H story behind that, one story behind all these stories, isn't there? How are you Sarah I'm good.
How are you, James good good.
Thanks for coming on the show. Thank you great to have me on again. I saw where you had something recently, rents, we know are climbing all the time, and the vacancy grates still very very tight, and I don't see any great changes to that. But when we looked at the recent inflation figures and the inflation figures, maybe you recall, folks were a surprise, the negative surprise. It's one of
the reasons that they're talking about staying up. The gloff going higher was that the four percent annualized circulation was driven by two things in particular. One was rentals, both related to properly. One was rentals spental costs. Was insurance and house insurance has really taken off on a trajectory that is a slightly disconcerting imagined for anybody.
Well, I can say that in Victoria, building insurance has been increased, so domestic building insurance is going to go up another sixty five percent. Essentially, the building insurance already went up eleven months ago by about forty three percent, So you can imagine that this is going to have a pretty big effect on those that are wanting to build their own hire.
Can you repeat the numbers? What happened last year, what's going to happen this year?
So in September last year there was already an increase to domestic building insurance by forty three percent, and then this year, about a month ago, insurance has been increased by another sixty five percent.
So that's extraordinary. Exactly, it's multiple of artentulation is I know this is an issue across the nation, and I know that from the national inflation figures, So what's the explanation.
Essentially, I think they're trying to crack down on builders. I mean, there is a lot of talk about there being some dodgy building practices out there, so that's the Victorian Managed Insurance Authorities position. But in terms ofercussions, I think is that those that are looking to build their own home builders are likely to pass on those extra costs to them.
So they're cracked down on dodgy builders by charging all builders higher insurance. Yes, that's terrible. I didn't know about that. It hasn't come up before. I did notice that the insurance figures were just completely out of line. This is an outgoing problem across the investment system. Really in an entirely different world. In financial planning and financial advice, for instance, they have a new scheme of last resort. It's calle where the company that you've got advice from boz under
you can now get to cover on that. Basically it's a form of insurance. But it's the same problem. They're charging the existing advisors for the sins of your life of other advisors, and here they are charging existing builders for sort of the doings of other bad builders. Okay, I see.
I will also add that they're also trying to crack down on there's obviously been an insolvencies for the Davis being one of them, So yeah, insolvencies, inflation and skilled worker shortgages are also another reason why the premiums have increased. So basically to ensure home use are protected, that's what they say.
So but they protect they may get anything dearer for them, they're.
Going to be the ones that pay probably.
Gee, yeah, that's so difficult. And one of the things about that in terms of we also mentioned on the show and a couple of people got very hot onto the collar in recent times about lenders mortgage insurance. It's a similar thing that everybody must pay. But you know, the figures suggest that in fact, the defaults are tiny on this even at the moment. But just to cover off on that about the builders, so there is a number of builders going under I I know that insolvencies
are at a record. I know that bankruptcies are at a record. There are the highest since Assets started collecting figures. And I was actually on really this morning we were talking about how also there's a death hot line in Sydney and the managers of that death hotline said that they have had more complaints and concern calls this year
already than they had all of last year. So for first time buyers, have the only sense of that segment of people who go to own to build their own house because the're traditionally seen as some sort of a cheaper way to do.
I mean, from my understanding, there has been you know, enticing offers in order for people to buy that sort of pizzlind and then build their own home. But in terms of increased construction costs, increased labor shortages, that isn't at all an enticing option, especially for young buyers such as myself.
Or it used to be. So people feel it's so sort of written.
With risk with written with risky absolutely and even just enjoying that your is built you know, to the best standard as well.
So yes, I can imagine, Yeah, I see. Okay, So that was that one, folks. I wanted to just put that on the table because I noticed the insurance popping out, if you like, on the inflation numbers. And of course turns out well, the property market is at the heart of it built on rentals and insurance. Now on another issue and sort of story that we will regularly and maya koppa And I've never actually done this story, but the Australian run stories like this, there are sun run stories.
Everyone runs stories like this. It's a bit eye catcher where people say or reporter says, hey, look, you know some RESEARCHU comes out and says, hey, af there's six suburbs in Brisbane, or there's twelve suburbs in Melbourne where you it's cheaper to buy than rent. And what really cut my eye recently was inner City Carleton in the middle of Melbourne. Attractive suburb by anyone's estimation, is on
this list. But I just want to ask you, have you ever looked at it and do you find those Is it fair actually to put that in front of people and get them more excited. I mean, can we tell this the whole story.
I recently did a story on this. I mean, look, yeah, I mean, it's always good to know your options, and I guess I think everybody is, especially first time buyers, are looking for any positivity that they can find in the market at the moment. But I recently wrote a story so based on some data that we've received, and yeah, Carlton was one of them. Something important to note, and there are a couple of disclaims. This is when we look at data like this, you've got to think about
the composition of these suburbs. So places like Carlton. Another couple that I had on the list where it would be cheaper to buy them would be trave and Core in Olburn. So yeah, obviously come speaking from a Victoria centricity. These are all places that are very close to the city and have a large amount of units. And when you have a large number of units, that drags the
median dwellings down. Yes, so some of the datas yes, if a buyer is put down a twenty percent deposit, these were some of the suburbs that would cost less to essentially serve as a mortgage rather than rent.
Okay, have you got a list of them there? Yeah, I've got a few. Yes, your four or five favorites.
Okay, again this is a Victoria, but Abbotsford, Chockland, North Melbourne trapping for notting Hill and box Hill.
Okay, and this would be mirrored in other cities around the country. But the part I've got to drive that here is so the thing is when we see these reports, what they say is the interest you would pay on your mortgage is less than the rent you would pay to the property owner. And that is true as far as it goes. It is true. But the thing is, when you own a place, develop more cost than interest. Do people fully understand that? Think?
I mean, it depends on you. There's a lot of costs and there is quite a large part to intrigue in terms of actually getting into the market. So and depending on what government schemes you're eligible for. But yeah, it's essentially and.
Why it is I would say to people listening when you see those reports, take it on board, but just don't be under the oppression that you can match this very simply the mortgage repayments against the rent payments.
You can't unfortunately, because there are running costs and I'm going to pick a number on the average apartment's will be ten to twenty grand a year of just costs this body corporate costs, there's insurance costs LMI, then there's mortgage insurance, all these various things that will come up. And I suppose the other thing about that. In a way, it's great to see that you can't do that, and that there are places you can buy that cost list and they do to rent. But what the real situation
here is that the rent is so high. Yes, the rents are so crazy.
Yes, I think on average rents across the nation have gone up about ten percent in the last twelve months. So yes, that's true. And yeah, like what you said, if due to Signify unit, you do have all these extra costs, like what you call things, Yeah, everything, Yes, rents of skyrocketed, so that's the main point. You know, some people are paying fifty dollars extra a week that compared.
To two months ago. Yes, I asked you. The last time you were on, we were talking about the unreported the side of the property market where people bid so they go win and the person says, hey, this rental is so much per week, and the person chupatches them in the corridor and say, that's what if I toss an extra ten twenty dollars at it per week? And does that happen? And does does it work?
Yes, it happens all the time. An agent can't say, you know, you should add an extra ten dollars onto your offer, and they kind of advise it that. But renters are more than willing to, more than allowed to add an extra ten dollars twenty dollars your week to get ahead of the pack. But in the area that in the first housing statement in September last year, they are trying to outraw all types of biding.
At the moment, you can't solicit it to The agent can't say, hey, you want to pay more, but if you volunteer, you can volunteer. Fine. I see, okay, very good, it's really interesting. Well take short breaks back in a moment. Hello and welcome back to The Australian's Money Puzzle podcast. I'm James Kirby, the wether editor at The Australian. It's Tuesday.
I'm talking properly property investment. And my guest today is Sarah Petty, property reporter from the hars Son who is out there folks at the auctions on the street, talking to the agents, the buyer's advocates, the buyers, which I find the most interesting aspect of a lot of the stories she does. She's talking to the people who are actually trying to investor trying to buy at the moment,
so she's very good notion of what it's like. Sara, if I said to you, I'm in a position to buy my first property anywhere in Australia, any type, and I said to you, would you like to advise me the nature of that property? What would you say? What would you say?
Okay, well, if you're just buying your first property, what I would say is there's grunny flats, you know, there's single level dwellings. They're really good bye.
That's really interesting. You mentioned that Stuart Williams was on the show last maybe last week and he said the same thing, and he had a villa units. Villa units unfashionable but perhaps lucrative options.
Oh very much so, and actually fashionable I would say at the moment, especially for first time buyers. I've seen it options then going for one hundred thousand dollars a price. So they're just a smaller house essentially, and some of them even have a backyard.
And they're in every city. Every city in Australia is full of them, as you know, folks that were built from the sixties to be he's talking about, you know, the suburban street there are six billi units, three on one side, three and the other roll down the middle sixpence front. But Stewart was making body, why do you buy one? Get you literally get land value and you get a guard and you get a garage. You to get a house? What's wrong with them? They're not cool?
They're not cool, I guess, but I think they're pretty cool as opposed to getting in a unit. They're actually pretty cool today.
Yeah, what's funny? I am I surprising. I lived in one for a year and a half, just a year and a half ago, because we built a house on the street and we lived on the Luckily enough, we were rent on the street that we're building the house on and it ended up in there for a year and a half during COVID develop mine. But it was very interesting to be I had never been in a villa, unit four, and they were so trouble free, first of all, and the other people there was only six in the block,
and it was all very or terbably. Everyone was well behaved, everyone was very interested in being it nice. It wasn't particularly good, it wasn't particularly bad, but it did strike me, gosh, a couple moved in next door, a couple with a baby, and it's drumthing like, yeah, absolutely everything a little back guard, front garden tends to be common. Back garden tends to be your own. But you get a lot for your bank, for your book, and they were keenly prized, I thought,
compared to apartments in townhouses. Very interesting. Okay, I love your answer. Now tell me while we have you in the studio about your recent story where you found an apartment in Melbourne Metropolitan Melbourne and it's sold sod for ninety nine thousand dollars. An everyone said, what was the issue with that apartment? What was the issue and what was the story?
Well, obviously there's a little asterix next to this sale, but yes, essentially, an apartment in Brankstein sold for ninety nine thousand dollars and some in this building have actually sold even less seventy thousand dollars. So it's formerly called the Ambassador Hotel, which was a ritzy wedding venue back in the eighties and nineties, but then later became a bit of a hub for vandalism, anfi social behavior, a couple of incidents, drug foot incidents. Paramedics apparently wouldn't go
unless they were assisted by police. So, however, the agent that I spoke to said that it has since cleaned up a lot. Another caveat is that there is a bit an overlay. We can't technically make one of those properties your principal place of reticidence. However, the agent said that that was ridiculous and it was a lot of such a thing and lots of people. We're living there ten years,
so yes, it does have a bit of a troubled past. However, the latest one that sold was actually to an older gentleman, and yeah, and he said that they're a great investment and apparently steps from the beach as well, So.
I know I cycled past it sometimes. Yes, it's on the main road, but the point of focus is not so much in particular. We're released because we don't think it all rush to it but it's a market and people will overpay and under and pay. And I think if there's a theme on the show today from Sarah, it's that if you find that property that in some way doesn't conventionally fit everybody everyone else wants, then you
may actually get value. So for instance, on the broad Overall team, everyone's running around looking for the they want the pretty house on the briny street, or they want the apartner with the view or whatever. And there are these villa units in every suburb in Australia and they have land value which every investor should know about, and they they are seen from several guests on our show. It's two in a row. Now, that's great value at
the moment. It keeps that in mind. And the other thing is, obviously if you aren't prepared to take the risk. Every property is different and it's not like shares. All Calmonic Bank shares the same, but not on property that investments aren't the same. I thought it was amazing that someone don't actually bought them the property for ninety nine thousand box sock and barrel, Metropolitan Melbourne. How wrong can you go?
You can't go wrong, And you even said you don't even need to put them on the market. I mean you can imagine why there's a waiting list for people trying to get into this block.
Now there you good in this market. It's fascinating, absolutely fascinating. Okay, we'll be back and along a couple of questions. Hello, Welcome back to the Australian's Money Puzzle podcast James Gadby with Sarah Petty. We are talking property and we are going to have some probably questions now. Actually this first one is properly it's from Luke and it's about Super.
The reason I've just dropped this in here is just to tell you folks that we really did have a big response, needless to say from the show how much should you have in Super? And just like I mentioned on the newspaper, I reckon we could run a show calle how much should you have in Super? I reckon we could run one every month and we probably have endless listeners because it's because it's a question that there
is no answer to, unfortunately, no simple answer. It's different for every single person, but everybody really wants to know. And that was a really good show with Ashley Owned and if you've missed it, and it would be a good idea to listen back to it because, as I say, it's a key issue. It's particularly a key issue in our in our society and our economy because because as compulsory and the leven and a half said, your salary is going into this every every year level and a
half percent of your salary. So you want to know as much as you can about to check out that show with ashually on one of the many questions we'll do with the questions on Thursday's show, But one of the many questions was from Luke, who says, as well as maximizing last financial years concessional contributions to Super, I've accidentally put in about two hundred dollars more than I was allowed. What will happen? The ATO will come to your house and take you away, Luke. No, I'm mony kidding.
This is never advised. This is general information, and I don't have a second opinion here on the show. I would just say that occasionally, over the years, in my deep enthusiasm to contribute as much as possible to Super, I have gone over once or twice a tiny bit, and I'm happy to say I wasn't fined or anything you can be fined. Whether it's their benevolence that they let you off with small numbers or whether their systems
are so accurate, I don't know. Obviously, you try to avoid it, and I suppose it's just a fair play. What you could do, obviously, is if you're putting in thirty thousand a year and one year you put in thirty one thousand you didn't mean to, then put in twenty nine the next and that ever should come up with the ato, you could say that ironestly tried to reconcile the issue there. Okay, now back to the property questions.
Marni Mr ni E on the issue of lenders mortgage insurance seemed to me the most unfair slug on home buyers. As a default rates are tiny, surely the insurance risks are tiny too. Yeah, I'd say there are, but it's because the bank's medic composory. It's become a big business lender's mortgage insurance. You mentioned it a couple of times, like, could you better tell readers at this business what it is and why it's why it's a horn in the shoe of the average home buyer. Yeah.
So, lender's mortgage insurance. This insurance and Linda takes out to ensure itself against the risks of a borrower being unable to meet their loan payments.
Yes, it doesn't have very often. The records show Australian owned buyers don't be fall very often, very very very rarely.
I think, especially in you know, an environment of igh interest rates, most banks are willing to refine it. It's very much the last.
Okay, actually, you know, I've been doing some very I have been doing I think some very interesting work of Liz on what's going on with mortgage childrens and how they're trying to survive through this particular period of what would seem to be high relatively high blitz relatively high and not sky high by the way, on a historical basis, but the relatively high. The two things are happening. People are flicking to interest only investors when they can or
I thought was really interesting was about mortgage extendards. Did you have be seen that where people are where an increasing amount of people are extending the life of their More so, what you do is you say, I cannot find any savings, I've got this mortgage. How am I going to manage it. And what they do is the renegotiate with the bank and they add five years and
then suddenly your your payments. So we made out that basics for the average person in that position, their payments come down about two hundred bucks a month, but their loan goes up about one hundred and fifty thousand dollars over there over the fullness of time. But people say, hey, you know, I face that problem. It's a future it's a picking the can down the road exercise. But anyway,
it is what's happening. And if you wonder how are people paying their mortgages when there's such rampant inflation, especially at the consumer side and the discretioniony spending side, well that's what's going on. There's a lot of that going on behind the scenes. Okay, that was the lender's mortgage insurance, which again, unfortunately is unavoidable for most people unless you fucking huge deposit. There's not what you can do there about netfolks. But you can keep in mind that you
can read finance. You can fit too interest only if you're an investors, say, and you're struggling with the investment you have and you can extend the life of your mortgage if you were a home owner struggling with your insurance. That's I think they're useful for people to know, useful sort of techniques. Okay. Final question, what's from Josh is the government's shared equity being up and running? Do you
recommend it? Thank you, Josh, And we don't, you know, we don't give advice, but the government, to be precise, the iban as government shared Equity same. It's really different than all the inner grants. Is that because the data is you and the government buy the house together. It's basically yes, does it exist yet and no.
So it's held up in Senate at the moment, but if everything goes to plan, it will pass and be up and running by the end of this year.
Okay, all right, I see. So it's not actually okay that out yet? Yes, can you apply?
I wonder I think the well Queensland is set to be the first two role out the shared Equity scheme, so it's not up and running yet, but it will be.
And so how it works is that you and the government together were buy the house. And how does the leend?
Basically, the government contributes after forty percent towards your mortgage loan, you can put down as little as two percent. However, that also means on the other side, when you sell your home, they will be able to ex slice the pie whatever or however much they Yes, they'll be able to take that in terms of your equity, but it also works the same way as it probably down so does the amount that they will be able to take from that.
Yeah, right, I know a lot of the Australians of the readers and commentaries did not like sharing anything with the government. But again, if you were you know, if you really needed to get to buy that place and if you didn't have any other option, I started closely kind of I wrote on it. Interestingly, in the UK they had this scheme and it was actually it was actually created by the Conservatives, not the Labor government. Conservatives, as you know, we're in for fourteen years in a
rolder and so they introduced this. Then that they had a House lords to a review of the scheme and basically they came out with a conclusion that it didn't do much for the provision of housing and market. You often get that sort of conclusion on a macro level, but for an individual different thing doesn't work for me, so I think for listeners it's worth checking out that share scheme.
Yeah, you know, it depends on what you do. If you just purely trying to find her home and get into the market, then it could be an option. Not give you any advice, of.
Course, anyone anywhere in the country as long as it's their first home is at the deed, yes, absolutely so. Right, so you get perhaps shared equity on a bill a unit, yes, and is a property the new heart property. So you heard it here first, folks, believe you heard it here actually last week too. You're hearing it here quite frankly. All right, very good, Hey, thank you very much, Sarah.
Very very interesting as always, it's a great round you have out there and it's something that everyone everybody's interested in. And I watched show what you do when I find some of the story is really really interesting. I told you one about the nineteen nine Tells dollar polishes particularly, so thanks a lotter. Great to have you on the show. We've talked again. Thank you, folks. Do keep those emails coming the addresses the Money Puzzle at the Australian dot com dot au. Thank you soon.